ByWil Crisp, ContributorOctober 24, 2013

Tripoli, Libya — Militias in eastern Libya have seized control of key oil infrastructure, launched their own government, and created their own army in a bid to improve their bargaining position as they demand semi-autonomy from the central government in Tripoli.

Their actions have reduced oil production to about a third of its post-civil war high and prompted international oil companies to reconsider investments in Libya. The outlook is worsening as declining security erodes the central government’s power and armed groups with their own agendas gain ground.

The disruption could be dire for Libya's economy – oil is the source of 95 percent of its export earnings and 95 percent of government revenue, according to the Organization of Petroleum Exporting Countries (OPEC). Seizure of facilities in the east alone has cost the government $6 billion in lost revenue since blockades began in July. For the last month, the country has been pumping about 600,000 barrels of oil a day, down from 1.4 million barrels a day at the beginning of 2013. [Editor's note: This sentence has been edited to correctly reflect daily oil production.]

The groups, dubbed federalists because they demand a system that grants them substantial political and economic autonomy while remaining part of Libya, scorn the central government in Tripoli. They say it has been taken over by the Muslim Brotherhood, and accuse it of funneling oil money to favored militias in the country and allies overseas. They also complain that Tripoli has failed to fairly distribute oil revenues and invest in infrastructure in the east.

“While politicians in Tripoli argue over the constitution and use militias to intimidate and kidnap one another, we have been working hard to improve our position,” says Osama Buera, a spokesperson for the armed groups in Libya’s eastern region, known as Cyrenaica.

“The international community must understand that when they (are) supporting [Prime Minister Ali Zeidan] and his government, they are actually supporting criminal Islamist groups – not a legitimate government,” he says. “As the chaos increases in Tripoli we are winning more support domestically and this needs to be recognized.”

Steps toward self-governance

The federalists are led by Ibrahim Jathran, a former commander of the Petroleum Facilities Guard, the armed government force tasked with defending oil infrastructure from militants after the civil war that ousted former leader Muammar Qaddafi. The groups have the backing of powerful tribes in the east, making any sort of negotiated resolution unlikely.

“On a purely military level, of course the Ministry of Defense could easily defeat Jathran’s men, but politically the situation is very difficult,” says Brig. Idris Bukhamada, the head of Libya’s Petroleum Facilities Guard. “If troops are sent in from the west that would only help to further unite the tribes of the east against the government.”

Today the Barqa Political Office, which represents the armed groups pushing for semi-autonomy, unveiled a new regional government with 22 ministries; an event it says is a milestone towards gaining international recognition – and selling oil independently of the central government, directing the revenue into its own coffers.

It comes on the heels of last month's unveiling of the Cyrenaican Defense Force, a regional army of 17,000 fighters, comprised of both militias and military units nominally under the control of the Libyan government as well as the military hardware in their possession. Najeeb Alhassi, a Libyan National Army colonel, was named as its leader – something some Libya watchers see as a significant blow to the central government’s authority in the region.

Oil field pawns

Oil production bounced back surprisingly quickly after the revolution under the supervision of the Petroleum Facilities Guard. Mr. Jathran was one of the shining stars of the unit until he turned against the government and seized control of the oil ports he was meant to be guarding, cutting Libyan production in half.

Although Brig. Bukhamada says Jathran and his men in the east pose the biggest challenge to restoring Libya’s oil production to pre-war levels, they are not the only ones upsetting the flow of Libyan oil. Indeed, holding oil production operations hostage has become a relatively easy way to pressure the government to meet various groups' demands, and copycat barricades have sprung up at oil and gas installations across the country.

Production at Wafa oil field in southwestern Libya, operated by the Italian oil company Eni, has been brought to a halt by the Amazigh, an ethnic minority based in western Libya. The group is demanding that its language be recognized as an official language in Libya’s still-unwritten constitution. [Editor's note: This sentence has been edited to correctly reflect the nationality of Eni oil company.]

“We make sure there are armed men with trucks and heavy weapons on the site 24 hours a day, seven days a week,” says Saraj Mohamed Essa, an Amazigh from the mountain town of Yefren. "We're not going to give up until the government agrees to our demands"

In Libya's south, oil companies are also worried about attacks by militant groups. The failure to create an effective, unified army in the wake of the revolution has left Libya's southern border poorly guarded and porous.

Earlier this year, the African Union’s special representative for counterterrorism, Francisco Caetano José Madeira, warned that “Libya has become a major transit hub for the main terrorist groups traveling from one country to another” and called the situation “extremely dangerous.”